C68

Computable General Equilibrium Models

Regional economic effects of changes in South Africa's electricity generation mix

This paper examines the long-run regional economic effects within South Africa of changing the electricity-generation mix away from coal. We use a regional CGE model of South Africa to conduct our analysis. The results of our simulations suggest that the effect of the policy is sensitive to other economic and policy conditions, in particular export market conditions regarding coal. Under conditions in which surplus coal resulting from lower domestic demand cannot be readily exported, the economies of coal-producing regions in South Africa such as Mpumalanga are significantly affected.

National minimum wage in South Africa: A Computable General Equilibrium Model Analysis

This paper analyses the economy-wide impact of the national minimum wage on the South African economy. The analysis was conducted using a static computable general equilibrium (CGE) model of South Africa, which captured the observed structure of South Africa’s economy. The parameters of the CGE equations were calibrated to observed data from a social accounting matrix (SAM) for 2010. One policy option with three scenarios was considered.

The Impact of the COMESA-EAC-SADC Tripartite Free Trade Agreement on the South African Economy

This paper analyses the effects of the COMESA-EAC-SADC Tripartite Free Trade Agreement (TFTA) on the South African economy using a global Computable General Equilibrium (CGE) model. Simulation results show that South Africa’s economy gains from the implementation of the trade agreement with GDP rising by more than 1 per cent relative to the baseline. This win in overall economic activity occurs on the back of a terms of trade increase and a surge in regional trade, which allows for higher levels of both exports and imports.

Effects of Increases in Value Added Tax: A Dynamic CGE Approach

This paper analyses the effects of increases in value added tax (VAT) through a dynamic computable general equilibrium model. The database of the model encompasses a social accounting matrix (SAM) for the year 2010. All the important South African taxes are included in the SAM and the household sectors are disaggregated according to income deciles, with the top decile being further split into five groups. Five different simulations are performed, ranging from 1% increase in the VAT to 5% over the period 2012 to 2018.

An Economy-Wide Evaluation of New Power Generation in South Africa: The Case of Kusile and Medupi

The South African economy has suffered over the past decade due to a lack of adequate electricity supply. With two new coal-fired power stations, Kusile and Medupi, scheduled to come online over a six year period (2014-2019), their additional generation capacity is expected to restore electricity reserve margins and facilitate increased growth and investment in the local economy.

A Simple Method for Computing Equilibria when Asset Markets Are Incomplete

The problem of computing equilibria for general equilibrium models with incomplete real asset markets, or GEI models for the sake of brevity, is reconsidered. It is shown here that the rank-dropping behavior of the asset return matrix could be dealt with in rather a simple fashion: We first compute its singular value decomposition, and then, through this decomposition, construct, by the introduction of a homotopy parameter, a new matrix such that it has constant rank before a desired equilibrium is reached.

The Impact of the 2014 Platinum Mining Strike in South Africa: An Economy-Wide Analysis

In this paper we measure the economy-wide impact of the 2014 labour strike in South Africa’s platinum industry. The strike lasted five months, ending in June 2014 when producers reached an agreement with the main labour unions. The immediate impacts on local mining towns were particularly severe, but our research shows that the strike could also have long lasting negative impacts on the South African economy as a whole. We find that it is not the higher nominal wages itself that caused the most damage, but the possible reaction by investors in the mining industry towards South Africa.

Effects of Reducing Tariffs in The Democratic Republic of Congo(DRC): A CGE Analysis

In this paper, the effects of reducing tariffs are analysed through a Computable General Equilibrium (CGE) model of the DRC. The specific DRC Formal-Informal Model (DRCFIM) is a multi-sectoral computable general equilibrium model that captures the observed structure of the DRC’s formal and informal economies, as well as the numerous linkages or transmission channels connecting their various economic agents, such as investors, firms, traders, and the government. The parameters of the CGE equations are calibrated to observed data from a social accounting matrix (SAM).

Water Taxation and the Double Dividend Hypothesis

The double dividend hypothesis contends that environmental taxes have the potential to yield multiple benefits for the economy. However, empirical evidence of the potential impacts of environmental taxation in developing countries is still limited. This paper seeks to contribute to the literature by exploring the impact of a water tax in a developing country context, with Uganda as a case study. Policy makers in Uganda are exploring ways of raising revenue by taxing environmental goods such as water.

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